JP Morgan: Chinese brokers' institutional business resilience offsets retail slowdown; top pick CICC (03908)

JP Morgan released a research report stating that Chinese brokers' September data showed divergence: retail business momentum continued to slow, with average daily A-share turnover falling 19% month-on-month to RMB 1.83 trillion, while margin financing and securities lending activity was also relatively weak. Weak stock market performance continued to drag on brokers' equity investment exposure. On the other hand, institutional business momentum remained resilient, with A-share and H-share IPO issuance continuing to recover in September, and the IPO pipeline remaining ample. The bank noted that A-share and H-share brokers are currently trading at forward price-to-book ratios of 0.94x and 0.63x respectively, and believes that the soft third-quarter industry earnings outlook and weakening investor sentiment have largely been reflected in share prices. The recent share price weakness provides accumulation opportunities for leaders CICC (03908), CITIC SEC (06030), and brokers with stronger third-quarter earnings momentum (such as CICC and CMSC). The bank's top pick remains CICC.